This article is an excerpt from Government Procurement, which is available for purchase.
In its September 2012 determination in Sunny Juara d.b.a Juara Enterprises v. Department of Public Works and Government Services, the Canadian International Trade Tribunal dismissed a complaint after finding that the value of the contract in question was below the treaty-prescribed contract value thresholds. The case dealt with the procurement of temporary housing accommodation services by the Department of National Defence in Mesa, Arizona. In rejecting the complaint on jurisdictional grounds due to the low estimated contract value, the Tribunal noted that there was no evidence that the government had artificially undervalued the contract costs to avoid the application of the trade treaties:
20. When the Tribunal accepted Jaura’s complaint for inquiry on June 26, 2012, it did so on the basis of the value of the contract awarded to Oakwood and the total amount of Jaura’s bid, which were both greater than $78,500. This was the only information available to the Tribunal at that time, as the NPP published on MERX by PWGSC failed to provide an estimated value for the contract.
21. However, PWGSC has now provided the Tribunal with a copy of the requisition for services that it received from DND, which estimated the total value of the proposed procurement, taking into account the 6-month option period and the applicable taxes, at $56,500. The Tribunal notes that the requisition is dated March 2, 2012, which is less than a week prior to the issuance of the RFP and the publication of the NPP.
22. While the Tribunal is in possession of evidence which clearly indicates that, on or around the time of publication of the NPP, the estimated value of the contract was below the monetary thresholds specified in the trade agreements, this fact alone does not preclude the Tribunal from conducting an inquiry into the complaint. The trade agreements prohibit government entities from selecting a valuation method that aims to avoid the obligations of the agreements. Therefore, if the Tribunal believes that the selection of a valuation method was used with the intention of avoiding the obligations of the trade agreements, it could, even when the monetary thresholds specified in the trade agreements have not been met, have jurisdiction to conduct an inquiry into a complaint.
23. In this case, the Tribunal has no reason to believe that DND selected a valuation method with the intention of avoiding the obligations of the trade agreements. Although the value of the contract awarded to Oakwood and the total amount of Jaura’s bid were both greater than the value of the contract as estimated by DND, this could be attributable to the fact that PWGSC only received proposals from two bidders. In the end, the Tribunal is satisfied that the estimated value of $56,500 for the contract was not unreasonable.
As this case illustrates, treaty-bound purchasing entities should note that the method they use to quantify their procurement values may be scrutinized to ensure that their estimated contract cost has not been artificially undervalued as a means of side-stepping the application of the treaties. As with other aspects of the procurement process, contract value estimates should be arrived at in a transparent manner in order to better ensure their defensibility in the face of subsequent scrutiny. In this case the Tribunal determined that there was no evidence that the Department of National Defence had selected its valuation method with the intention of avoiding its trade treaty obligations. It therefore dismissed the compliant on jurisdictional grounds.
